Mortgage rates have eased sharply from their recent peaks, offering some relief to buyers and refinancing opportunities for homeowners who have been “stuck” in the so-called “golden handcuff effect,” but industry experts are still warning that getting back to a path of true affordability will take time.
Since interest rates spiked after the COVID-19 pandemic housing boom, there has been little movement in the market. Homeowners were unwilling to sell because they’d have to give up their ultra-low mortgage rates, and potential buyers faced limited inventory and higher borrowing costs.
Mauricio Umansky told FOX Business that while housing affordability remains a challenge, there are early signs of improvement. For instance, he said he has already started to see prices starting to drop, though official data hasn’t reflected it yet. He also projected that lower interest rates will boost supply and help the market rebalance and become more affordable in 2026 and into 2027.
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Philip White, CEO of Sotheby’s International Realty, also told FOX Business that they have also seen some encouraging market dynamics. He pointed to how inventory levels are already showing growth across much of the real estate market.
“This increased supply is providing buyers with more selection than we’ve seen in recent years, which is creating a more balanced real estate market,” White said. “While interest rates remain a key factor, the improved inventory situation represents one of the more notable shifts we have seen this year, and we believe market accessibility for qualified buyers could improve as these factors continue to evolve over the coming months and into next year.”
While Realtor.com chief economist Danielle Hale said it’s too hard to be certain what affordability will be like in 2026 and 2027, she said mortgage rates have declined nearly 70 basis points from the 2025 high and about 150 basis points from the 2023 peak, which has already improved affordability for the near term.
The average rate on a 30-year fixed mortgage fell to 6.35% last week, marking the largest weekly drop in the past year, according to mortgage buyer Freddie Mac.
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“This creates refinance opportunities for those who purchased homes in these peak periods and also creates significant affordability relative to these periods,” Hale said. “Whether we see further improvements in affordability in 2026/2027 is a more open question.”
Interest rates are expected to remain in the low 6% range for at least the next year, according to Hale, who noted that the market has already priced in several cuts between now and mid-2026. She expects only modest affordability improvements from mortgage rates over the next year.
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Hale also predicted that incomes will grow, which will help ease the financial burden. But as the labor market cools, this growth is not likely to be as robust as it has been.
Another major contributor to improving affordability is lower home prices, she said.
Hale underscored that there won’t be any “full affordability unlock in 2026/2027,” but that there is still “potential for modest improvement in housing affordability” with even more potential in some softer housing markets.
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